Excerpt: - .....which the delivery of goods takes place, and(3) where as a necessary incidence of the contract of sale goods sold are required to be exported or imported or transported out of the state in which the delivery of goods takes place.'it is, therefore, necessary that movement of goods from one state to another must be in the course of sale. an example will make the position clear. take the case of a dealer who has shops in different parts or cities of india and in order to meet the demand at different cities the dealer from his headquarters at calcutta or delhi sends goods to those different cities to be kept at those shops of the dealer to meet the demand of the consumers. can it be said that in such a case there was a movement of goods in the course of inter-state sale it cannot be so.....

Judgment:ORDER

Sabyasachi Mukharji, J.

1. The petitioner in this case is the Damodar Valley Corporation, a statutory Corporation established by the Damodar Valley Corporation Act, 1948. The Corporation was established, inter alia, for the purpose of generating electric power for distribution, control of flood in Damodar and to provide water for irrigation. The Corporation supplies power in the statutory area of the Valley and certain areas outside the Valley with the permission of the State Government. In order to fulfil the statutory obligation, the Corporation has set up a power generation and transmission system in the area. Part of the area falls in the State of Bihar and the other part falls within the State of West Bengal. Power system consists of a 132 KV Grid or a ring of 132 KV transmission lines astride the boundary of the two States. The Corporation operates generating stations, two of which are in West Bengal and four of which in the State of Bihar. feeding power and energy into the said 132 KV Grid. There are a number of sub-stations in both the States connecting to the main 132 KV lines for supplying power to the consumers either at 33 KV or 132 KV. It is the case of the petitioner that the agreements are executed by the Corporation with individual consumers for supply at the sub-stations which are located either in Bihar or in West Bengal. The petitioner states that the said agreements provide for supply of certain amount of power upto a stipulated maximum demand expressed in KW at a specified voltage, frequency, and number of phases. The petitioner emphasises that the agreements do not stipulate from which generating station the supply would be available. A copy of the standard agreement form usually entered into with the consumers has been annexed to the present petition. According to the petitioner the demand of power and energy of a consumer on any individual sub-station would actually vary continuously and certain amount of power and energy would flow into the point of supply from the generating station located in West Bengal and Bihar depending on the electrical conditions of the whole system. The petitioner states that there is no stipulation that supply to a sub-station, say for instance, Kharagpur would have to come from a power station in West Bengal or Bihar at a particular point of time.

2. The petitioner further states that in order to develop a wider regional power service, the Corporation has taken on rent a double circuit 132 KV transmission line from the Corporation's Sonenagar sub-station to Pipri Sub-Station of Rihand system in Uttar Pradesh. The transmission line from Sonenagar to Pipri is owned by the Bihar State Electricity Board, but the Corporation has been using it exclusively on payment of hire charges. This rented line also forms part of the DVC KV Grid system, which makes it possible for the Uttar Pradesh system to operate in parallel with the system of the Corporation. In this case also power and energy flows from Rihand Hydro Electric Station to the Corporation Power Grid or from the Corporation Power Grid to the Rihand Power System of Uttar Pradesh depending on the electrical conditions and total load on the respective systems. According to the petitioner, in this case also there is no stipulation from which generating station the supply would flow into the Uttar Pradesh system. The petitioner states that neither is there any stipulation at which points the power and energy received from Uttar Pradesh would be supplied. The supply to Uttar Pradesh, according to the petitioner, could very well be from the generating station in West Bengal. Similarly, power received from Uttar Pradesh could either be supplied in Bihar or West Bengal depending on the power demand at different locations at a particular moment,

3. It is the case of the petitioner that electricity unlike other goods cannot be stored in a yard, tank, godown, warehouse, depot or dump. Hence, it is pumped into a grid which spreads over miles and miles, crossing the boundaries of different States, end actual sales take place from sub-stations at the delivery points. According to the petitioner the grid itself is, therefore, in a way, only a store house for electricity. The sale points are the delivery points which lie within the spheres of the State in which the sale takes place. The petitioner states that all the sale points for West Bengal are in West Bengal and for Rihand it is at Pipri, which is in Uttar Pradesh. Therefore, the petitioner's case is that there is no inter-State sale involved in the transaction and the sales are local sales. The Supreme Court in the case of Commr. of Sales Tax, Madh. Pra. v. Madhya Pradesh Electricity Board, : [1969]2SCR939 has held that electricity is goods within the meaning of the definition of Madhya Pradesh General Sales Tax Act of 1959. In the premises the sale of the said goods became exigible to the levy of sales tax under the Central Sales Tax Act, 1956 if the other conditions were fulfilled. Since 1973. however, electricity has been exempted from the levy of the Central Sales Tax Act. For the period 1962-63 to 1S68-69, that is to say, from 1st April, 1962 to 31st December, 1969 the respondent No. 1 namely Superintendent of Commercial Taxes, Giridih acting under the Bihar Sales Tax Act issued notice upon the petitioner on the 24th of January, 1970. The said notice stated as follows:--

The electricity so generated is sold (i) toparties in Bihar and (ii) to parties in otherStates.

2. The sales of electricity to parties in other States are made against agreement between the parties concerned and Damodar Valley Corporation. Therefore, such sales of electricity take place in the course of 'Inter-State trade' and as such will attract the Central Sales Tax (Amendment) Act, 1959.

3. In their judgment dated November 26, 1968 in the case of Commr. of Sales Tax, Madhya Pradesh v. Madhya Pradesh Electricity Board, : [1969]2SCR939 the Supreme Court of India have held that 'Electricity' is 'goods'.

4. In the light of what has been stated in the foregoing paragraph, the electricity generated at the units of Damodar Valley Corporation in Bihar and sold to parties in other States would be sales in the course of inter-State trade on which Central Sales Tax would be payable in Bihar.

5. The tax-liability of Oamodar Valley Corporation thus briefly explained, the Corporation is directed to comply with the terms of the formal notice herein annexed.

6. The mode of compliance and the date fixed therefor as specified in the annexed notice should be carefully noted.' Thereafter another notice was issued on the 24th of February, 1970 asking the petitioner to produce the evidence. The petitioner made submission contending that there was no inter-State sale involved and the petitioner was not liable. On 20th February, 1970 an order was passed by the respondent No. 1 which stated, inter alia, as follows:

'Shri K.P. Singh Under Secretary of the Corporation appears. The opportunity (sic) taken up by him against the Corporation's liability are as follows:--

(a) Power generated by the D.V.C. system in Bihar, West Bengal and Uttar Pradesh is pushed in the common grid for the purpose of utilisation. It is not, therefore, possible to segregate how much power generated at the systems in Bihar are utilised in other States. There could thus be no inter-State sale of such power.

(b) The D.V.C. generates electricity in Bihar as also in other States. It would not, therefore, be correct to assume that the inter-State sale of electricity is made only in respect of power generated in Bihar.

I find no substance in the aforesaid arguments to support the conclusion that the D.V.C. is not liable to tax on Inter-State sale of electricity. The fact that electricity generated in Bihar goes into the common grid which receives electricity generated in other States also does not appear to affect the liability of the Corporation. The existence of a common grid or common transmission channel is hardly the deciding factor. The issue is simple enough. The D.V.C. systems in Bihar generate electricity, say 'X' unit The D.V.C. also supplies electricity in Bihar say of 'Y' unit. The formula, therefore is 'X' minus 'Y'. If 'X' is larger than 'Y' and if the residual quantity is then supplied to parties in other States, the residual quantity will have to be treated as Inter-State sale, other conditions of inter-State sales being fulfilled. If, however, 'Y' is larger than 'X' which is prima facie not correct, the position will be different.

The D.V.C.'s liability to the tax was briefly explained in memo No. 109 dated 24-1-1970. The Corporation's representative. Sri K.P. Singh has promised further arguments after obtaining the advice of the Corporation's counsel. I would like to hear the full arguments of the Corporation on 10-3-1970 in my office at Giridih. On that date the Corporation should come prepared with all the figures of 'generation' and 'sale' in the light of the analysis above given to enable me to proceed ahead with final determination in the matter.'

4. The petitioner challenges in this application under Article 226 of the Constitution the aforesaid action on the part of respondent No. 1 namely, the issuance of the notice asking the petitioner to file a return and the impugned order dated 20th February, 1970. In deciding this application two points are necessary to be decided namely, (1) whether sale of electricity by Damodar Valley Corporation, in the facts and circumstances of the case is sale in the course of inter-State trade or commerce and (2) even assuming it is sale in the course of inter-State trade and commerce, under Section 8(2-A) of the Central Sales Tax Act, 1956 is any tax leviable as tax on sale of electricity under the appropriate Sales Tax Laws is exempt from tax generally both under the Bihar Sales Tax Act, 1959 and the Bihar Electricity Duty Act, 1948. So far as the second aspect is concerned it is no longer open to tine petitioner to contend that no tax is leviable in view of Section 3 of the Central Sales Tax (Amendment) Act, 1969 which provides as follows:

3. In Section 6 of the principal Act,--

(a) after Sub-section (1), the following Sub-section shall be, and shall be deemed always to have been, inserted, namely:--

'(1-A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by turn in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State':

(b) in Sub-section (2), for the word, brackets and figure ' Sub-section (1)', the words, brackets, figures and letter ' Subsection (1) or Sub-section (1-A)' shall be, and shall be deemed to have been, substituted with effect from the 1st day of October, 1958.'

5. The only question, therefore, that requires consideration in this case is, whether, in the facts and circumstances of this case, the sale of electricity by Damodar Valley Corporation was sale in the course of inter-State trade or commerce. The principles upon which this question will have to be determined are well settled. Section 3 of the Central Sales Tax Act, 1956 is material for our purpose. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. Therefore, there must be a sale. Secondly, as a result of the sale there must be a movement of goods from one State to another and thirdly, such movement of goods must be caused or due to the sale. These three ingredients are essential for bringing within the orbit of the Central Sales Tax a transaction. In the case of Cement Marketing Co. v. The State of Mysore, : [1963]3SCR777 the Supreme Court ob- served as follows:

'A sale could be said to be in the course of inter-State trade only if two conditions concur: (1) A sale of goods, and (2) a transport of those goods from one State to another under the contract of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-State trade,'

Thus the tests which have been laid down to bring a sale within inter-State sales are that the transaction must involve movement of goods across the border:

Mohanlal Hargovind's case; transactions are inter-State in which as a direct result of such sales the goods are actually delivered for consumption in another State: M/s. Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and others; a contract of sale must involve transport of goods from one State to another under the contract of sale: Bengal Immunity Co.'s case. In the case of sales in the course of export or import the test laid down was a series of integrated activities commencing from an agreement of sale and ending with the delivery of goods to a common carrier for export by land or by sea; The Bombay Co. Ltd. case. 'In the course of' was explained to mean a sale taking place not only during the activities directed to the end of the exportation of the goods out of the country but also as part of or connected with such activities, and 'integrated activities' was explained in similar language. This Court again accepted these tests in Endupuri Narasimhan's case. In Section 3 of the Central Sales Tax Act (Act 74 of 1956), the Legislature has accepted the principle governing inter-State sales as laid down in Mohanlal Hargovind's case. The principles for determining when a sale or purchase of goods takes place in the course of inter-State sale or commerce outside the State are:

'Section 3 -- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.'

'Clause (a) of Section 3 covers sales, other than those included in Clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State.'

6. This question was again considered by the Supreme Court in B.G.N. Plantations Etc. v. Sales Tax Officer, : [1964]7SCR706 where the Court dealing with the expression Sale in the course of export at p. 759 (of S.T.C.) observed as follows:

'A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be an obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India. There are a variety of transactions in which the sale of a commodity is followed by export thereof.'

7. The Supreme Court in the State of Bihar v. Tata Engineering and Locomotive Co. Ltd., : [1971]2SCR849 had also occasion to consider this question and at page 149 of S.T.C. = (at p. 480 of A.I.R.) of the report the Court observed as follows:

'The decided cases establish that sales will be considered as sales in the course of export or import or sales in the course of inter-State trade and commerce under the following circumstances:

(1) When goods which are in export or import stream are sold;

(2) When the contracts of sale or law under which goods are sold require those goods to be exported or imported to a foreign country or from a foreign country as the case may be or are required to be transported to a State other than the State in which the delivery of goods takes place, and

(3) Where as a necessary incidence of the contract of sale goods sold are required to be exported or imported or transported out of the State in which the delivery of goods takes place.'

It is, therefore, necessary that movement of goods from one State to another must be in the course of sale. An example will make the position clear. Take the case of a dealer who has shops in different parts or cities of India and in order to meet the demand at different cities the dealer from his headquarters at Calcutta or Delhi sends goods to those different cities to be kept at those shops of the dealer to meet the demand of the consumers. Can it be said that in such a case there was a movement of goods in the course of inter-State sale It cannot be so said. There was movement of goods undoubtedly and the said movement was for the purpose of effecting sale but the movement was not caused by or in the course of the sale. The movement was not occasioned by sale. The position, however, is different if the dealer from his Calcutta office sells to a consumer at Patna or Hyderabad and the goods are moved out of Bengal in pursuance of that sale. In such a case the question of inter-State sale will arise. I have referred to the order passed on the 20th February, 1970 by the respondent No. 1. The respondent No. 1 has found no substance in the arguments of the Damodar Valley Corporation. He has referred to the contention that the electricity generated in Bihar goes into the common grid which receives electricity generated from other States. According to him the said position does not appear to affect the liability of the Corporation and the existence of a common grid or common transmission channel was hardly the deciding factor. I am unable to accept this position. The main question, is, whether the common grid or the grid itself is only a store house for electricity as contended for by the petitioner or is the position as contended by the respondent that electricity once generated has to be consumed and there can be no provision for storage of electricity and grids are not such storage. Upon the determination of this contention the question, whether, the agreement of sale that the Damodar Valley Corporation entered into with the different consumers occasioned the movements of electricity from Bihar to Bengal or to other State would arise. The Officer concerned is right in so far as he holds there was movement of electricity from one State to another. He is also right that the quantity of such movement can be determined by applying the formula of 'X' minus 'Y' as he has indicated in the impugned order. But the question is whether the quantity 'X' minus 'Y' which is moved out of Bihar and goes to other States was as a result of the sales that the Damodar Valley Corporation had made to the different consumers. That question will have to be decided by determining the occasions when such movements took place and by correlating the occasions of such movements with the transactions of sales that the Damodar Valley Corporation had entered into with different consumers and then must be judged in the background of the function of grids for the purpose of storing or transmitting electricity. This is a question which has to be determined upon evidence, technical and otherwise, In view of the provisions of Section 6-A, introduced by Central Sales Tax (Amendment) Act, 1972 the burden of proof in this case would be on the petitioner on this aspect of the matter.

8. The next question, is, whether the petitioner is entitled to make this application under Article 226 of the Constitution without satisfying the respondent No. 1 about the liability of the petitioner to be taxed. As I have mentioned before the determination of the question whether the petitioner is liable for the inter-State sale, in the facts and circumstances of the case, depends upon determination of the factual question whether the sales occasioned the movement of goods. In this case it is undoubtedly true that there have been sales by the Damodar Valley Corporation of electricity to the different consumers. It also, in my opinion, perhaps cannot be disputed and can be established that there have been movements of electricity from one State to another. The only point that is necessary for determination in this case is, whether such movement of electricity was in the course, of the sale made by the Damodar Valley Corporation. This as I have mentioned before is a question of fact to be determined on evidence- technical and otherwise. The respondent No. 1 in my opinion, has jurisdiction to decide this question.

9. Counsel for the petitioner drew my attention to the decision of the Supreme Court in the case of Bengal Immunity Co. Ltd. v. State of Bihar, : [1955]2SCR603 and Counsel referred me to the observation at page 457 of the report. There the Court found that the notice calling upon the appellant to comply with the provisions of the Sales Tax Laws was ultra vires in view of Article 286 of the Constitution. Where such was the situation, namely the validity of the provisions under which action is sought against a citizen is in dispute a citizen is entitled to move the Court under Article 226 of the Constitution and not to go through the entire procedure of assessment. Similar view was expressed by a learned Single Judge of this Court in the case of Biswa Ranjan Sarvadhikary v. Income-tax Officer, F Ward, District II (2), Calcutta : [1963]47ITR927(Cal) . If on undisputed facts or on the facts estabished before the Court it is clear as a matter of law that the authority proceeding against the person is acting without jurisdiction or in excess jurisdiction or under the provisions of law which are void or ultra vires in such a case the person aggrieved, undoubtedly, has the right to agitate the question at the earliest opportunity and move this Court under Article 226 of the Constitution. But in a case where the liability of a person or the jurisdiction of the authority to proceed depends upon determination of certain facts and the authority concerned has the jurisdiction to determine that fact, in my opinion, unless that determination is made the petitioner is not entitled to make any grievance and come to this Court seeking the remedy under Article 226 of the Constitution. The respondent No. 1 has indisputably jurisdiction to determine whether the sales made by the Damodar Valley Corporation were sales in the course of inter-State Sale of trade or commerce. If that is the position, in my opinion, the petitioner at this stage is not entitled to challenge the action of the respondent No: 1 in so far as respondent No. 1 has called upon the petitioner to file its return and comply with the provisions of Bihar Sales Tax Act, 1959. In the case of Isha Beevi v. Tax Recovery Officer, : [1975]101ITR449(SC) the Supreme Court has again reiterated the position that the existence of an alternate remedy is not generally a bar to the issuance of a writ of prohibition. But in order to substantiate a right to obtain a writ of Prohibition from a High Court or the Supreme Court, an applicant has to demonstrate total absence of jurisdiction to proceed on the part of the officer or authority complained against.

10. Counsel for the petitioner drew my attention to the decision in the case of Associated Hotels of India Ltd. v. The Excise and Taxation Officer, Simla, . He also drew my attention to the decision of the case of Sundaram Finance Ltd. v. The State of Kerala, : [1966]2SCR828 . In the facts and circumstances of the case, in my opinion, the said decisions are not relevant to consider. It must be mentioned however that in view of the principle laid down by the Supreme Court about the nature of inter-State sale and in view of the contention raised by the petitioner in my opinion, the finding of the respondent No. 1 that the fact that the electricity goes in the common grid to other State does not affect the position is premature, In so far as he has held that movement of residual quantity of electricity 'X' minus 'Y' there would represent inter-State sale, in my opinion, indicates there has not been a proper appreciation of the correct position. That, by itself, would not be decisive of the position. The main question is, as indicated before, the true nature of the grid.

11. In the aforesaid view of the matter in the interest of justice, I am of the opinion that the impugned order dated 20th of February, 1970 and marked as Annexure 'C' to the present petition should be set aside and accordingly I direct the respondent No, 1 should consider the question afresh after the petitioner has complied with the notice of the respondent No. 1 by furnishing return and by adducing such evidence as the petitioner chose to do. The respondent No. 1 would give the petitioner reasonable opportunity again for (sic) doing and after the petitioner complies with the said opportunity or if it does not comply with the said opportunity by the time given by the respondent No. 1 to proceed in accordance with law.